Foley Hoag LLP

Lawyers equally skilled in the art of war and diplomacy

Our Bankruptcy and Restructuring Group provides a full range of services to financial institutions, business entities, governmental agencies, individuals, and fiduciaries regarding federal bankruptcy, state insolvency, and creditors’ rights law.

Our lawyers are experienced in all aspects of bankruptcy, restructuring and related business litigation, including:

• Formulation and confirmation of plans of reorganization and liquidation
• Out of court restructurings
• State court receiverships
• Prepackaged plans
• Cram-down disputes
• Debtor-in-possession financing
• Cash collateral litigation
• Valuation proceedings
• Post-petition financing
• Asset sales
• Motions for relief from the automatic stay
• Adversary proceedings
• Bankruptcy appeals

Our group represents debtors, secured and unsecured creditors, creditors' committees, trustees, and defendants in adversary proceedings brought by estate representatives. We also provide services to parties interested in purchasing assets from, making investments in, or obtaining control of financially troubled entities.

Our practice extends to many jurisdictions. Members of our group have appeared recently in bankruptcy courts in Massachusetts, Delaware, Maine, New Hampshire, Vermont, Rhode Island, New York, California, Florida, and Texas.

Unsecured Creditors and Creditors' Committees

Many of our clients are unsecured creditors pursuing their rights both before and within formal bankruptcy proceedings. Our representation of creditors is focused on maximizing the value of their claims in insolvency scenarios.

In addition, our Bankruptcy and Restructuring Group has special skills in representing unsecured creditors' committees in Chapter 11 reorganizations. In recent years, the firm has represented creditors' committees in industries as diverse as apparel manufacturing, healthcare, resort facilities, and retail sales. In our representation of creditors' committees, we provide intensive analyses of the debtors’ financial prospects. On our client’s behalf, we press for plans of reorganization that pay the largest possible dividend to unsecured creditors, yet are feasible and realistic. The firm’s work as committee counsel has repeatedly resulted in successful plans of reorganization that paid unsecured creditors dividends significantly in excess of initially proposed plans and surpassed the expectations of our client constituencies.

Bankruptcy Acquisitions

We have represented private equity funds, strategic investors, industry players, and other parties in connection with the acquisition of assets. Our lawyers have assisted clients in successful section 363 auctions, as well as investments through plans of reorganization, including in the Chapter 11 cases of ACT Manufacturing, Plymouth Rubber, RJ Development, Blackstone Technology, and Glycogenesis.

In addition, we have represented numerous venture capital clients in the successful non-public acquisition of assets from companies in financial distress, including via Article 9 foreclosures, assignments for the benefit of creditors and private sales.

Secured Creditors

The firm represents banks and other financial services companies as secured creditors in lien enforcement actions in federal bankruptcy proceedings and state court. Such representation calls for aggressive, persistent, and resourceful action to recover possession of, and foreclose against, real estate and personal property collateral. This includes:

• Negotiating and documenting “adequate protection” orders for the use of cash and non-cash collateral or debtor-in-possession financing orders
• Prosecuting motions to lift the automatic stay
• Drafting and confirming liquidating plans proposed by secured creditors

The firm also has particular experience representing second-lien lenders in bankruptcy cases and pre-bankruptcy workouts.

Debtors

We have represented clients in healthcare, high technology, manufacturing, retail sales, and communications industries in workouts, prepackaged bankruptcy plans and, if ultimately necessary, Chapter 11 reorganizations.

We place an emphasis on helping debtors find creative and cost-effective solutions to their problems, including introductions to potential financing sources, equity partners, and buyers. Debtor representation often requires a multi-disciplinary approach, so our bankruptcy lawyers frequently team with our lawyers who specialize in other areas of practice, such as corporate, tax, securities, labor and employment, real estate, and commercial transactions. As a result, our bankruptcy lawyers draw on the collective knowledge of the firm to assemble the proper client team for each debtor.

For instance, in recent reorganizations, our bankruptcy lawyers worked with attorneys in our healthcare, venture capital, government strategies, and business defense practices. Similarly, we have called on the knowledge of our real estate and corporate departments in representing real estate developers in out-of-court restructurings of mortgage loans with multiple mortgage lenders and in structuring Chapter 11 “cram-down” plans when negotiations did not resolve a dispute. Our corporate and tax departments also played a large role in connection with a recent recapitalization of a real estate partnership in a hotly contested Chapter 11 proceeding.

Workouts

To avoid the transaction costs that would otherwise be incurred in bankruptcy proceedings, the firm represents its secured creditor clients in negotiating and documenting loan modifications. We also have a special sensitivity to avoiding equitable subordination, or other bankruptcy-based avoidance actions. We are proud of our ability to fashion creative solutions for even the most difficult of defaulted loans.

In this regard, our lawyers have developed skills in structuring workouts involving deeds-in-lieu-of-foreclosure, cash-flow mortgages, equity participations, and other strategies for maximizing the ultimate realization by the secured creditor.

Wind-downs

Our bankruptcy lawyers have developed extensive experience advising companies and investors on the best methods for closing businesses and winding down operations of unprofitable ventures. We are quickly able to assess a deteriorating situation and determine how to shut down a business with a minimum of risk to directors, officers and investors. We have expertise in helping our clients avoid potential liability to creditors and other parties in a wind-down situation, while maximizing the possible recovery on assets and investments.

High Technology and Intellectual Property Advice

Our firm regularly advises clients regarding bankruptcy-related intellectual property issues. In the current high-technology environment, many of our clients express concern about the financial viability of entities involved in licensing transactions and other technology-related ventures. Our bankruptcy lawyers analyze the risks inherent in such situations and assist our clients in negotiating licenses and other agreements that will fully protect their rights in the event of a bankruptcy by the other party.

Adversary Proceedings

Our bankruptcy lawyers have a litigation orientation, and our clients regularly call upon us to represent them in adversary proceedings. Debtors and creditor committees have also retained us as special litigation counsel. The firm’s experience in adversary proceedings includes:

• Preferences, fraudulent transfer and other avoidance actions
• Claims against officers, directors and insiders for breaches of fiduciary duty
• Equitable subordination and re-characterization actions
• Litigation against secured creditors
• Claims against professional service firms that rendered services to the debtor

Recent Public Representative Engagements and Clients

Here are some examples of the types of work we do on bankruptcy, restructuring and related litigation matters:

• In re Fort Hill Square Associates: The firm represented the managing general partners of the debtors, who own One and Two International Place, the largest commercial office building complex in downtown Boston. The debtors had pre-petition debt in excess of $600 million. Following extensive plan and cram-down litigation with the primary secured lender, the debtors successfully emerged from bankruptcy in conjunction with an over $700 million recapitalization, with unsecured creditors receiving 100% of their claims and our clients, the general partners, retaining significant ownership interests in, and day-to-day management of, the reorganized debtors.
• In re Scott Cable: The firm represents four Massachusetts-based private equity funds in defense of a pending lawsuit brought by the United States Department of Justice on behalf of the IRS, seeking to equitably subordinate and recharacterize over $50 million in claims under secured notes issued in connection with Scott Cable’s 1996 plan of reorganization. The trial of this highly complex and unprecedented matter spanned 35 days before the United States Bankruptcy Court for the District of Delaware.
• In re Malden Mills Industries: The firm represented the creditors’ committee in the 2001-2003 Malden Mills Chapter 11 reorganization. Malden Mills, one of the largest privately held companies in Massachusetts, restructured approximately $180 million in secured and unsecured debt. The court confirmed a consensual plan of reorganization between the debtor, the unsecured creditors and the company’s senior secured lenders, which provided unsecured creditors with a substantial cash dividend and part ownership of the reorganized company. The firm continues to represent the creditors trust established under the plan in post-reorganization matters, more recently in connection with the company’s 2007 bankruptcy filing. The firm prosecuted the much publicized motion that led to the transfer of the 2007 bankruptcy proceedings from Delaware to Massachusetts.
• In re ACT Manufacturing: The firm represented Benchmark Electronics, Inc., a public company and contract manufacturer located in Angleton, Texas, in connection with Benchmark’s successful purchase of the majority of the assets of ACT Manufacturing out of ACT’s Chapter 11 proceeding in the Bankruptcy Court for the District of Massachusetts. The firm assisted Benchmark with both the sale process, comprising a contested court hearing involving multiple rounds of bidding over two days, as well as with the closing, which was a cross-border transaction involving the acquisition of the stock and assets of corporations located in North America, Asia and Europe.
• In re Glycogenesis: The firm represented Marlborough Research and Development, Inc., now known as Prospect Therapeutics, Inc., an affiliate of a West Coast private equity fund, in connection with its successful purchase of the majority of the assets of Glycogenesis, a publicly-traded biotechnology company based in Massachusetts. Following a two-day contested evidentiary hearing, the Court rejected the attempts of the debtor’s founder to prevent the transfer of a patent license, and approved the sale to the firm’s client.
• In re Engage: The firm represented the creditors’ committee in the Engage Chapter 11 reorganization in the Bankruptcy Court for the District of Massachusetts and the creditors trust established following the sale of the majority of Engage’s assets to a third party. On behalf of the trust, the committee and the debtor's estate, the firm brought a multi-count adversary proceeding against Engage’s former parent, CMGI, Inc., and various directors and officers, alleging claims for equitable subordination, fraudulent conveyance, avoidable preference, unlawful dividend, alter ego liability and unlawful and deceptive trade practices, among others, and seeking monetary damages. Following extensive litigation, CMGI settled for a substantial cash payment and waiver of its secured claim against the estate, ultimately resulting in a dividend to creditors in excess of 60%.
• In re Organogenesis: The firm represented Organogenesis, a Massachusetts-based biotechnology company, in its Chapter 11 reorganization in the Bankruptcy Court for the District of Massachusetts. Organogenesis successfully restructured approximately $40 million in debt and obtained court approval of a plan of reorganization that paid a guaranteed dividend to creditors of 35%.
• In re RJ Development, Inc: The firm represented the creditors committee in the Chapter 11 cases of RJ Development and two related entities. The debtors are biotechnology companies that manufacture a variety of silicone-based products and other medical devices. They emerged from bankruptcy in October 2006 pursuant to a plan that is estimated will pay general unsecured creditors 40 cents on the dollar. The firm now represents the post-confirmation Liquidating Trustee.
• In re Blackstone Technology, Inc: The firm represented Ampersand Venture Partners in its provision of debtor-in-possession financing and subsequent acquisition of the majority of assets of Blackstone, a software developer, out of Blackstone’s Chapter 11 proceedings in the Bankruptcy Court for the District of Delaware.
• General Motors Acceptance Corporation: The firm is regular outside counsel for GMAC in New England for bankruptcy matters involving motor vehicle dealerships. The firm represents GMAC in its status as a secured creditor in both Chapter 11 and Chapter 7 cases, including negotiating cash collateral orders, moving for relief from the automatic stay, and foreclosing on GMAC's collateral after stay relief is granted.
• PricewaterhouseCoopers: The firm has represented PwC and previously Coopers & Lybrand in adversary proceedings and other bankruptcy related litigation brought by creditor representatives alleging accounting malpractice. These have included matters arising from the Healthco, Flagship Healthcare, and Mariner bankruptcies.
• In re Trend-lines, Inc.: The firm was co-counsel to the creditors committee in Trend-lines’ Chapter 11 reorganization in the Bankruptcy Court for the District of Massachusetts. Trend-lines, which owned two retail chains -- Woodworkers Warehouse and Golf Day -- defeated the efforts of the company’s secured lender to liquidate its assets and successfully reorganized around the Woodworkers Warehouse stores.
• In re East Boston Neighborhood Health Center: The firm served as counsel to the creditors' committee in the East Boston Neighborhood Health Center Chapter 11 reorganization. East Boston Neighborhood Health Center is a community based medical center and its ability to continue to operate was vital to the provision of health care services in the East Boston and Winthrop areas. East Boston Neighborhood Health Center successfully reorganized, paid unsecured creditors a significant dividend, and continued its operations.
• In re New Seabury Company Limited Partnership: The firm served as counsel to the creditors' committee in the New Seabury Chapter 11 reorganization. New Seabury is one of the largest golf courses and resort communities in New England. Two competing plans of reorganization were proposed, from the debtor and an outside purchaser. Due in large part to the firm's involvement as committee counsel, each plan proponent eventually filed a plan paying unsecured creditors 100% of their pre-petition claims, with compound interest.
• In re Charles River Hospital, Inc.: The firm's expertise in health care bankruptcies was also featured in the Chapter 11 reorganization case of Charles River Hospital, a psychiatric hospital and outpatient facility located in Wellesley, Massachusetts, in which the firm served as counsel to the debtor.
• In re Standard Media, Inc.: The firm represented the majority shareholder and one of the largest creditors of Standard Media, Inc., the publisher of the Industry Standard, in its Chapter 11 reorganization in the Bankruptcy Court for the Northern District of California.